I Want Charged Off Debts Removed From My Credit Report. – Edward

I have 2 credit card debts that total $30,000 that have not been paid in 4 years and the banks have written them off. 1 bank has already sent me a 1099 form last year and I already settled that tax debt with the IRS. I have no intention of paying these debt offs, since they drop off my credit report in 3 years and I have never gotten a collection call or letter in 3 1/2 years. I do not have anymore credit cards and plan never to have anymore for the remainder of my lifetime. This is the only debt that I have never paid-off in my credit lifetime, it is business related.

I want to my debts removed from credit report, especially the 1099 debt. Since this was declared as income by the bank, and I paid the IRS, this debt has been settled. Any advice what I can do or say when I write the credit agencies to have these removed?

Edward”

Dear Edward,

Wish and want all you want, it doesn’t work like that. Even though a debt has been charged off and reported as 1099 income it does not make the debt either settled or paid. In fact a 1099 debt can still be collected and sued on. A 1099 statement does not nullify the debt.

A third circuit bankruptcy case recently decided that Form 1099-C does not establish that debt is discharged. A creditor typically issues a Form 1099-C to a debtor in bankruptcy to show cancellation of debt. The credit union in the case In re Bononi, had sent the Chapter 7 debtor zero-balance account statements and an IRS form 1099-C for “cancellation of debt.” After receipt of the form and the account statements, the debtor received money from the settlement of a personal injury action.

The court found that despite the statements and the 1099-C form, the debtor still had an obligation to pay on the past debt. Additionally, the court found that even if a creditor issues a 1099-C form, the form does not prohibit the creditor from pursuing collection of the old debt. Only a discharge from the Bankruptcy Court has the effect of canceling the debt and removing the debtor’s liability for the debt. In re Bononi, 19 CBN 864. Source

Your credit report is like a report card in school. Just because you got a D in some class does not mean it gets removed if you latter retake the class or don’t like the grade.

I can’t see any reason why the credit bureaus would even consider removing this accurate but negative item.

And while I’m piling on the bad news, this debt can be attempted to be collected on for the rest of your life. The only limitation is that they may not sue past the statute of limitations and that will be decided by your state law.

“I can’t see any reason why the credit bureaus would even consider removing this accurate but negative item” The Credit Bureaus are not the party that “considers” removing the information. The Credit Bureaus report what their customers report to them. The “investigate” a dispute if you so choose. IF the original creditor OR collection agency does not respond to, correct, or verify the info is accurate; the “negative” item must be removed.

http://GetOutOfDebt.org Steve Rhode

You need to go back and look at my answer in context of the 1099 debt.

If the creditor does not respond to a verification request it may be removed but unless they fixed it then it will be reported again the next time the creditors dumps their data to the credit bureaus.

However it is not true that a creditor must always respond or the negative items is removed.

Here are two examples when a creditor does not have to respond.

You already contacted the CRA. If you already contacted the consumer reporting agency directly to dispute incorrect or incomplete information in your credit file, and the company that furnished the information already responded appropriately to that dispute, it does not have to respond again, unless you provide it with additional information.

The dispute was prepared by a credit repair organization. The creditor also does not have to investigate if it has a reasonable belief that a credit repair organization submitted the dispute or prepared the dispute on behalf of the consumer, or a consumer submitted the dispute on a form supplied by a credit repair organization.

WakeUpb4its2L8

Oh, I am clear on the rest of the answer. I was not trying to argue. I was simply replying to the….”I can’t see any reason why the credit bureaus would even consider removing this accurate but negative item”.

That statement by itself, to me at least, looks as if you were implying that the credit bureaus have to make the decision to remove a negative item. That decision is not of one in which the bureau must consider. The bureaus serve their customers. The cutomers of the bureaus are the “creditors”. We, the people which the bureau scores brand, are not the customer. We are just protected to some extent by the FCRA.

We are talking about a for profit business, this FICO business. There is a reason (monetary) why this business is difficult to specifically interperet and why some of the specifics are more secret than Area 51.

In closing, i was not trying to extend in theory past an initial dispute. Obviously there are some exceptions after that point. And, the more confusing part we could have talked about is IF a person’s dispute ever made it past the OCR where as the person disputing could ultimately, in their own ignorance, really think the item was investigated reasonably. That is why there are alternatives for that. Anyway, I didn’t mean for the topic to get way off track.

Regards

http://GetOutOfDebt.org Steve Rhode

And we are back on the same page.

Good2beout1

This is very confusing!! I read the same irs info that Judyss posted before finding this site. I think its pretty clear. 1099c or sell/forgiven. not both. What’s the final on this topic?

Judyss

I read recently through irs website a 1099 c once issued can no longer be collected on either forgive it or sell it not both, are yu saying the government website is giving false unformation regardu/ng these practices

http://GetOutOfDebt.org Steve Rhode

What is the link to the page the IRS says this on. I could not find it.

But yes, a 1099C is not an elimination of an obligation to repay a debt unless the creditor has agreed to do so. It is an accounting function.

Judyss

Here is a link to the website I saw it on, on the IRS website it states if a company issues a 1099-c and continue collection activities then the 1099-c is basically void it states exactly Topic 431 – Canceled Debt – Is it Taxable or Not? In general, if you are liable for a debt that is canceled, forgiven, or discharged, you will receive a Form 1099-C, Cancellation of Debt, and must include the canceled amount in gross income unless you meet an exclusion or exception. If you receive a Form 1099-C but the creditor is continuing to try to collect the debt then the debt has not been cancelled and you do not have taxable cancellation of debt income.

Wikianswers states in its first paragraph on collections after cancellation of debt A 1099c is issued to a debtor and to the IRS when a debt has been canceled (or forgiven). Once a debt has been canceled (or forgiven) and a 1099c issued to the debtor and IRS, no further collection attempts shall be made. If they are, then the debt has not been canceled (or forgiven) and no 1099c should have been issued to the debtor or to the IRS. note: website: http://www.helpwithmybank.gov (under consumer loan-general questions section) which states that unless the bank forgave or cancelled the debt, you are still obligated to repay the loan. Also the IRS states that continued collection, the existence of a lien relating to the debt, or the sale of a debt by the creditor are direct indicators that a debt has not been canceled. note: website:http://www.IRS.gov pubication 525 and instruction for 1099ac for further info.

I agree but the IRS statement is about the same creditor attempting collection of the debt, not a new owner of the debt.

An original creditor must report the debt on a 1099-C when they write it off but the underlying debt can be sold to a NEW owner which triggers the forgiven debt by the original owner. A 1099-C is a tax function and does not impact the underlying legal contractual obligation of owing the debt to a new owner. The IRS has no authority over that.

Publication 525 does say:

“Repayment of canceled debt. If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. The statute of limitations generally does not end until 3 years after the due date of your original return.”

I could not locate the statements you referenced in that publication.

Judyss

I totally disagree with you Steve, a company that issues a 1099-c can not sell the debt to another company I read on one website that either forgive it or sell it not both, and as soon as I find the link to that website I will post it for you. The statements I posted by the IRS are at the very top of the publication under 1099-c

http://GetOutOfDebt.org Steve Rhode

Please do post the link for me. I did review the publications you directed me to and did not find the assertions you feel they state.

Keep in mind this information I posted previously, “The court found that despite the statements and the 1099-C form, the debtor still had an obligation to pay on the past debt. Additionally, the court found that even if a creditor issues a 1099-C form, the form does not prohibit the creditor from pursuing collection of the old debt. Only a discharge from the Bankruptcy Court has the effect of canceling the debt and removing the debtor’s liability for the debt.” – Source

I’d also be interested in your opinion of how a form required to notify the IRS of a tax event has some authority to cancel legally binding agreement between a creditor and debtor.

Yobinn

once you get a 1099 the debt is dead you have paid the taxes and the credit card compay has written it off

http://GetOutOfDebt.org Steve Rhode

Actually that’s not quite right. A 1099 is an indication that the account has been written off as forgiven but unless it is discharged in bankruptcy, it is actually still collectible. See this previous article for details.

“The court found that despite the statements and the 1099-C form, the debtor still had an obligation to pay on the past debt. Additionally, the court found that even if a creditor issues a 1099-C form, the form does not prohibit the creditor from pursuing collection of the old debt. Only a discharge from the Bankruptcy Court has the effect of canceling the debt and removing the debtor’s liability for the debt. In re Bononi, 19 CBN 864.”

http://Website Dave

I can give some advice that may work. This advice worked for me and his situation is very similar.

Go to http://www.annualcreditreport.com and pull each credit report one at a time. It is totally free and no credit card needed. File a dispute on each charge off right online at the website. Use any reason you like. I used, “I have no record of this debt”. Now each credit bureau will have to investigate the validity of this debt. If the creditor or new owner of the debt does not respond to the inquiry of the validity of the debt within 30 days it will be removed. This is under the Fair Credit Reporting Act.

When I did this ALL mine were removed and here is my theory as to why. The older the charge off, the better the chances the debt was sold off to a debt buyer. When it gets sold off to debt buyers the records may be poor or they just don’t bother responding because they in actuality only paid pennies on the dollar. Or, the credit bureaus can’t even track down who owes the debt anymore because the records are just so poor and the debt is so old.

Not saying it will work on all of them or any for that matter, but it’s worth a shot as it worked in my case. They even removed a small judgment from Sears from my credit reports! My score went through the roof when all these dropped off!!

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